Why CEO loneliness is bad for business

June 29, 2012, 9:00 AM UTC

FORTUNE – For a layperson, it’s tough to understand why CEOs make the choices they do. It seems clear, in hindsight, that J.P. Morgan (JPM) CEO Jamie Dimon should have put the kibosh on trading practices that could ultimately cost the company $9 billion. To the rest of us, it looks like there were warning signs.

It also appears obvious to us that Rupert Murdoch could have dodged at least some of the fallout from the phone-hacking scandal if he had a better handle on what was going on at News Corp. (NWS), which announced Thursday that it would split its publishing and entertainment arms into two companies.

Certainly, a myriad of factors influence the leaders of Fortune 500 companies. But one factor that can affect people at the top more than others — and in a different way than ever before — is isolation.

Sure, it’s hard to pity people with so much money, even if they feel a little lonely every now and then. But isolation, when mishandled, can trigger dangerous communication breakdowns. When CEOs don’t trust the team surrounding them, the health of a corporation suffers. Just look at the fallout from board wars at Pfizer or MF Global misplacing some $600 million in its investors’ money.

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This sort of isolation is prevalent among CEOs, says Thomas Saporito, chairman and CEO of consulting firm RHR International: “The notion that it’s lonely at the top is not just a trite phrase. I’ve been at this for over 30 years, and I’ve spoken with 200 plus CEOs — there are precious few that didn’t, in the privacy of our discussions, talk about loneliness.”

This June, RHR International, published a survey of 100 CEOs who reported, among other things, feelings of isolation. Of those surveyed, 41% said they experienced loneliness in their jobs.

Modern CEOs may feel more isolated than CEOs in the past, in part, because the spotlight is much sharper. For today’s leaders, “the biggest difference is that CEOs in this era are undergoing an incredible level of scrutiny,” Saporito says. “They’re under the gun from just about every which angle. Shareholders, regulators and analysts expect a much greater level of transparency.”

To stay out of the CEO bubble, leaders must learn to spot and cultivate genuine interactions among the deluge. While they may have to appear bulletproof much of the time, they also need to find spaces where they can be fallible. 

Scrutiny is part of the job, says Saporito, and good leaders accept that. Then, he adds, “the really good ones figure out how to create a system and a culture of feedback that is safe.”

That platform for safe feedback can take several forms. Frank Sorrentino III, founder and CEO of North Jersey Community Bank says that he holds focus groups with representatives from every level in the company, where people can air their grievances, and they certainly do.

“When people look at you, they look at your title first,” he says. “They’re not coming in to talk to Frank, they’re coming in to talk to the CEO. And when they’re coming in to talk to the CEO, they’re not going to tell you what they really think.” Focus groups are one possible method to give employees room to communicate to top executives on a personal level.

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Just like everyone else, CEOs need a safe space to say what they really think. Chief executives can find it, says Michael Useem, on the boards of other companies, where they are among true peers. They can also look outside the office. “I’ve run into various chief executives that consciously create personal groups,” Useem says, where they can talk off the record. It’s a concept that’s been out there. Bill George, a professor of management at Harvard Business School has written books on his “True North” philosophy, which involves meeting with peers who, over time, form a tightknit emotional support group. He claims that his own group has been invaluable to his career.

Mitigating loneliness all comes down to a skill that Saporito defines as managing one’s own vulnerability. “That’s where the loneliness comes in,” he says. CEOs are trying to maneuver between stakeholders, employees, and regulators, “and while they’re trying to do all that, where can they say what’s on their mind or talk about their options? To precious few people,” he says. Maybe a lead director or trusted advisor. “That person is someone they know whose agenda is nothing more than what’s in the best interest of the CEO and the company.”

Prioritizing the best interest of the company, actually, can be a great way to break the CEO isolation bubble. CEOs who feel like they are a part of something bigger than themselves can either deflect feelings of isolation or justify them. From the corner office, often, it can look like the world is against you. And these days, without a solid, relatable cause to stand behind, it just might be.